Tax Credits for Micro Enterprises and the Self-Employed

(Rules relating to credits to be claimed on any expenses incurred in 2020)

Micro enterprises and self-employed persons may benefit from a tax credit equivalent to 45% of eligible expenditure (subject to certain conditions). An additional bonus of 20% (total 65% tax credit) applies to undertakings operating from Gozo.

For an eligible cost to be claimed the costs must be incurred between 1st January and 31st December (both days included) of the year preceding the year in which the claim is submitted. The deadline of 24 March 2021 applies for any eligible expenditure incurred from 1 January 2020 to 31 December 2020 by any self-employed individuals submitting their tax return in June. On the other hand, the deadline of 26 May 2021 applies for companies that submit their tax return in September.

Late submissions may be accepted by not later than the extended deadline of the following year in which the expenses are incurred – however, in such case the tax credit may be availed of only from the year of assessment commencing in the following year. For expenses incurred in 2020, the extended deadline for late applications is 15 December 2021 (for both self-employed individuals and companies) and accordingly any tax credits claimed by virtue of a late application may be available as from year of assessment 2022 onward.

Eligible expenditure under these rules includes:

1. Furbishing, refurbishing, and upgrading of business premises;
2. Investment in acquiring machinery, technology, apparatus or instruments which enhance the operations;
3. Capital investment in Information Technology;
4. Purchase costs of one commercial vehicle incurred over a period of 3 years. As from 1 January 2021, eligible undertakings may also claim the cost for the purchase of any commercial vehicle having the latest Emission Standard rating (currently Euro 5 (2014)) if such vehicle is purchased as a replacement for a similar vehicle. An eligible undertaking that has not claimed the cost of a vehicle in 2019 and 2020, may still claim the cost incurred for the purchase of one Commercial Vehicle. Therefore, the cost of purchasing such vehicles is considered as eligible expenditure as from 1 January 2020;
5. Wages costs where an increase over the last 3 years of the gross wages paid by the company exceeds 3% of the highest wage costs in any of the previous two (2) fiscal years (i.e. 2018 and 2019).

As from 1 January 2018 the maximum tax credit available is capped to €50,000 over a period of 3 years commencing from the year ended 31 December 2017. Such limit is increased by an additional €20,000 (i.e. raised to €70,000) for undertakings: 

(a) operating in Gozo;

(b) registered as a Family Business;

(c) having more than 50% of the ownership attributable to female persons.

Eligibility: main conditions to be satisfied (at the point of application) for undertakings to benefit from this Scheme:

1. The applicant must be a single undertaking that employed not more than fifty (50) persons on Full Time (FT) contracts (the data used to verify this condition is provided by Jobsplus) for a consecutive three (3) month period during the year in which the costs were incurred;
2. The applicant (in the case of a legal person) must employ at least one (1) person (on full or part-time basis) on the date of application. The person employed may be the applicant himself in the case of self-employed persons. In any case, such employment must be registered with Jobsplus;
3. The applicant must be a single undertaking whose turnover did not exceed €10 Million in the fiscal year preceding the year in which the application is submitted;
4. For any eligible expenses incurred (except wages costs) a copy of each tax invoice or fiscal receipt (as applicable) must be submitted to Malta Enterprise;
5. Start-ups are given 5 years to utilise tax credit;
6. Unless exempted, applicants should be registered with the VAT department;
7. Self-employed persons should be registered with Jobsplus;
8. Applicants must not be defaulting on VAT, Income Tax, and Social Security. No Tax Certificate will be issued by the Corporation prior to regularising the position with the relative departments;
9. Persons or undertakings engaged in activities specifically excluded under the de minimis regulations (these include undertakings active in the fishery, aquaculture sectors, the agricultural sectors and certain undertakings involved in the road freight transport sector) are not eligible for this incentive;
10. This incentive is not intended for voluntary organisations;
11. The application form should be submitted (online) all at once. Undertakings wishing to benefit from this incentive may submit one (1) application per calendar year.

This article reflects the guidelines published by Malta Enterprise as at 3 March 2021.

For further information contact:

Roberto Sammut   

Senior Accounts Manager

E: roberto.sammut@dfkmalta.com

Olivianne Sammut

Accounts Manager

E: olivianne.sammut@dfkmalta.com

Sonia Muscat

Accounts Senior

E: sonia.muscat@dfkmalta.com

*The objective of this summary is to outline the principal elements of the rules being summarized herein. Accordingly, it is not intended to be provided by way of comprehensive and definitive advice. Readers should seek professional advice by contacting DFK Malta Tax & Consultancy Limited before acting upon any information included in this document.